Feeding its hunger for a greater slice of the Northeast Ohio market, New Philadelphia-based accounting and advisory firm Rea & Associates is acquiring Cleveland's Walthall CPAs.

Financial terms of the deal were not disclosed. Walthall is slated to merge into Rea on Nov. 1.

The combined practice will have a total staff of about 300 people and 13 offices in northern and central Ohio.

Walthall managing partner Richard Lash said the firm, founded in 1944, tossed around ideas about a potential combination with Rea executives several years ago. But it was in early 2016 when they began discussing a deal in earnest.

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Richard Lash

Lash said the chance to offer more to legacy Walthall clients and staff alike — all employees are being offered jobs, he said — combined with adding to the Rea footprint, made the move compelling.

Having similar cultures, though, helped seal the deal. Lash said the firm, which has kept relatively steady in size in recent years with about 50 employees, nearly 40 of them CPAs, has been approached about an acquisition numerous times over the past decade.

For Rea, which was founded in 1938 and already has small offices in Wooster and Mentor, the deal gives the firm a foothold in Cleveland and injects an "incredible" talent base into their operations in the crowded Northeast Ohio market, said Rea CEO Don McIntosh.

He said Rea has had eyes on Cleveland for the past 10 years. And it has been inching closer, having acquired Friel & Associates in Mentor in November 2016. Their last deal prior to that spread the firm's footprint west with the absorption of M.A. Hoops & Associates in Lima in September 2014.

"Breaking into a market like Cleveland from scratch is an unbelievable task, and we've seen some firms try to come to Cleveland with no success," McIntosh said. "It's not an easy territory to get in. So it was critical that we find someone who is highly respected in the industry in that marketplace that people believe in and trust for us to make the splash we want to make."

Of Walthall's four locations — in Amherst, Cleveland, Mentor and Wooster — the latter two will merge into nearby Rea offices.

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Don McIntosh

The combined firm's Mentor, Amherst and Cleveland (Independence) offices will be branded as Walthall Rea.

Rea had $33.9 million in revenue 2016, according to data provided to Crain's, and Walthall logged $8.5 million that year.

Meanwhile, with Rea's presence in the state expanding, the firm is divvying operations into regions.

Lash will become regional president for Rea's Northeast Ohio region, which will comprise offices in Amherst, Cleveland, Medina and Mentor. The other locations, including the Wooster office, will fall into the firm's East Central region, which will be overseen by Rea's current director of manufacturing services, Kyle Stemple.

Rea has developed niches in sectors including manufacturing, government and health care, and it has a strong consulting business that's largely considered the financial lifeline in the evolving business model for accounting-based service firms. Courting new and existing clients with those new services will be a major focus for Lash.

However, Lash also noted how Walthall has grown through the years by acquiring smaller, boutique firms. That's something he'll look to replicate in this market for Rea.

"It will be my role here as president of the Northern region to go talk to firms with a deeper bench and a whole variety of different services to provide," Lash said, "and to go out to some of the firms out there to see if they want to talk to us as a new, combined firm."

McIntosh said Rea already is vetting other potential acquisitions as part of the firm's M&A strategy. Some targets, he indicated, could branch the firm outside Ohio. He declined to get into more details but emphasized that Rea's top priority is its home state.

"At the end of the day, we want to work very hard at being a dominant firm in the markets we are located in now," McIntosh said. "We do that by continuing to grow, bringing in great talent and servicing the heck out of our clients."

NEO consolidation continues

The Rea and Walthall combination is one of the larger mergers in the accounting industry to happen in 2017.

However, it follows a trail of several notable deals that have hit the market in the past few years.

Allan Koltin, CEO of Koltin Consulting Group Inc. in Chicago, an adviser on mergers and acquisitions in the accounting sector, said firms both inside and outside Ohio are seeing opportunity in this market and are vetting firms to roll up here.

"There continues to be about a half-dozen firms fixated both in and out of the state wanting to come to the Greater Cleveland market," Koltin said. "Some of these are firms significant already in Columbus and Cleveland, as well as Indiana. I think you're going to see more consolidation going on."

He added that the pulse among many firms is they're more interested in growing through acquisitions right now than firms are willing sell. Those most likely to entertain a merger are ones without a clear succession plan in place — which is a prevailing trend in an industry ripe with aging ranks.

"So it's a seller's market today because, in my perspective, there are more firms that want to be in Cleveland than there are firms willing to entertain an upstream merger," he said.

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